Lucror Expects Fix to Jababeka Bond Squeeze Amid Default Risks

(Bloomberg) -- It’s not in bondholders’ interest to push the co. to buy back $300m of bonds maturing in 2023, risking default and low recoveries, Lucror says in note. Lucror maintains hold recommendation on notes as sees situation being resolved.

• “We think Jababeka simply needs to obtain a consent waiver for the breach, which can be sweetened with a small fee”: Lucror
• If notes continue to fall, Lucror may change recommendation to buy
• S&P said Tuesday Jababeka could face “increasing default risk” following a proposed change in the composition of its board of directors and board of commissioners. That could trigger a change-of-control clause on its $300m bond, and potentially require Indonesian property co. to buy back the notes
• Jababeka does not have enough funds at the moment to buy back its 2023 notes, according to President Director Budianto Liman
  • Co. had only $60m of cash as of end-March 2019: Lucror
• NOTE: Jababeka’s 2023 bonds rose about 0.2 cent on the dollar to 95.1 as of 12pm in Hong Kong, after falling 2.42 cents on Tuesday, the biggest decline since November 2016, according to Bloomberg-compiled data